This blog aims to study the mechanics of business and occasionally find a gem of insight.

(Consult your financial adviser before making investment decisions. Following the advice here does not guarantee performance and there is a substantial risk of loss)

Tuesday, March 31, 2009

Onex cuts stake in Cineplex

Onex corp has started selling off some of its position in Cineplex. The article notes that Cineplex was recently enjoying strong performance in 2008. This wasn't always the case as cinema's were suffering (price drops to $9 admissions, cost saving M&A - the merger with Galaxy and Famous Players a few years ago)

Despite their success, I'd take the article's comment about Cineplex being "recession proof" with a grain of salt. A consumer good that has traditionally demonstrated a relatively high degree of income elasticity and even some challenging market shrinking problems in better times. I'd even go so far as to say that it's simply that they have been lucky that there have been good films put out lately. Or maybe cinema experiences simply crossed the line into becoming an "inferior good" (economic sense, not quality).

However, this speaks directly to the point I had posted previously about Private Equity winners and losers: it's a 50% sale across the board and now is a terrific time to buy something if you have the money, as Onex clearly does (or will after the sale).

It will be interesting to see what captures their interest and how they decide to invest their capital.